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Bitcoin to blow up Africa banking system

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By Timothy Akintola

Jack Dorsey working to establish a counter narrative on bitcoin’s importance.

Jack Dorsey, CEO of Block and his top brass visited Accra in December for the inaugural ceremony of the African Bitcoin Conference to discuss the potential transformative and disruptive possibilities to the existing financial system. Since its establishment in 2008, this unfamiliarized monetary form had been seen as an absurdly complex toy for techies, a legal getting form, or even a major opportunity for criminals to obscure their fraudulent funds. However, this financial system plays a pivotal role in social good by offering a financial system on-ramp for people who would otherwise have been left out. With national currencies being largely unsafe, the enactment of a virtual currency that does not demand an intermediary has been immensely vital.

With the prominent rise of cryptocurrency, becoming a flashpoint for regulators, Dorsey and his colleagues have been working to essentially create a counter narrative on the importance of bitcoin in giving economic freedom and power to people that would have had none. Mike Brock, the CEO of TBD at Block which focuses on cryptocurrency and decentralized finance, noted that despite the fluctuating price, was still very much useful for moving money across the globe instantaneously. He also explained that everywhere in the world, there was a market for bitcoin.

Interoperability is still a problem with alternative banking in Africa.

It is imperative to note that moving money across Africa has always been an expensive and complicated venture. For people living in remote and rural environments, there is limited access to commercial bank branches. Digital banking have also been limited in its operations. As such, tacking the incessant hyperinflation, governmental corruption and capital control trapping domestic cash in banks can stop at once. A part of this problem, research has shown, emanated from Africa’s quasi-colonial payment framework, which about 80 percent of the cross-border transaction payments from African banks are worked on offshore, especially in the United States or Europe, translating to higher processing costs and time.

There is also the mobile money, which transaction in Africa rose by 39 percent to more than $700 billion in 2021, according to the GSM Association. Statistics from the World Bank also indicated the account ownership at financial institutions and money service provider had doubled over the last decade, rising to about 55 percent in Sub-Saharan Africa. Whilst adoption proliferates, mobile money users still do not understand the perk of legacy banking. Interoperability has also remained a major challenge with alternative banking in the continent.

Intermediaries of cash transfers could be directly eliminated.

Firms like MoneyGram and Western Union offer expansive physical services across the world as a design to help those who have no bank account to move money. This network was immensely cumbersome to build, a reason for the less competitors and cash transfers incurring substantial fees. With bitcoins, these intermediaries could be eliminated, letting people send funds directly to one another. Alex Gladstein, the Chief Strategic Officer for the Human Rights Foundation noted that this model would help people make payments without IOUs, fists or credits. Dorsey used the situation surrounding the #EndSars protest in Nigeria, where the government blocked protesters from receiving money via their banks, to further indicate the usefulness of bitcoin.

However, moving money via bitcoin blockchain is with its own problems. On times when the demands peak, fees tend to spike. Also, if a user cannot pay a premium for the transaction, they will have to wait for the confirmation of more transaction blocks before their transfers go through. But Bitcoin’s Lightening Network helps in alleviating these challenges through slashing of these transactions to zero, whilst enabling instant cash payment across the globe. Yellow Card, regarded as Africa’s largest cryptocurrency exchange has also been working towards embedding this layer two technology into its platform, in a bid to drive down transaction prices to virtually nothing.

Dorsey promises to continue building in Africa, despite challenges.

Kgothatso Ngako, a South African developer was reported to have integrated lightening network with the GSM, in a bid to reach a wide range of customers. He indicated that his goal was majorly to people without access to internet connection, the capacity to still send and receive bitcoin. Dorsey thus noted that more and more adoption in Africa will emanate, despite the government’s efforts to control the citizens’ behaviorism through financial oppression. He emphasized that regardless of the challenges faced, his company would continue to build, with nothing stopping them. That, he stated was most important.

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